How tech investment drove UK small business resilience during Covid-19

It’s been another challenging year for small businesses, from the continued impact of Covid-19, to supply chain issues and more. For many small businesses, digitalisation has become the answer – and the equivalent of the old ‘apple a day’ idiom. Digitalise and you’ll be healthier. Simple.

But describing the benefits of digital transformation – improved processes, happier customers – is far more straightforward than actually achieving them.

And just because something is the right thing to do, doesn’t make it the easy thing to do. Our recent One Step research clearly outlined this, with small businesses in the UK still struggling with barriers to digital adoption, from resistance to change to lack of confidence. We’ve offered some tips on how you can overcome these challenges.

The flip side of this coin, however, is that those who have successfully digitalised have achieved significant benefits, gaining an edge and building resilience during these most turbulent times. The good news is that more businesses than ever are making this leap.

Xero’s recent research, exploring the current state of small business digitalisation, found that UK firms remain the leaders in technology adoption and spending, with digital expenditure IT up by 20% by June 2021 compared to pre-pandemic levels.

Here, we take a look at some of the key findings in the report, and why the fruit-based analogy may still be apt for these businesses.

Gaining an edge

Our survey findings show the tangible difference digital transformation can actually make.

UK small businesses that had higher levels of tech spend experienced greater sales and fewer job losses throughout the pandemic – gaining a vital edge at a time when these firms needed all the help they could get.

Businesses in the lowest quartile of technology expenditure saw their sales fall, on average, by £33,600 between 2019 and 2020. Meanwhile, those in the top quartile saw a much smaller drop of £1,200 year-on-year – a hefty difference of £32,400.

And other long-standing challenges for small businesses were also eased by tech adoption. The top 25% of spenders were paid 1.6 days faster than the bottom 25%, while payment times in May 2020 were considerably less severe for this top quartile of businesses, who were paid almost four days faster than those who spent the least on technology.

It’s no exaggeration to say that these prompt payments can be the difference between collapse and survival for many.

App-y to help

The report also demonstrates the benefits of apps. In-fact, it’s the first research to incorporate the intensity of app usage in its findings.

Small businesses who embraced apps achieved significant benefits. For example, both the bottom and top 25% of UK app users were significantly more productive than non-users.

However, while this is clearly good news for businesses, more than half of the Xero subscriber base still do not engage with apps at all. Here, perhaps, is where those barriers to digitalisation once again emerge – something that, with the right support and solutions, can be tackled.

Read the report in full here and check out the Xero App Store to find out more.